Banks Like Rates But See Trouble in Qualifying

With banks spending $2 billion a year on more than 6.3 billion pieces of first-class mail, lower postal rates would seem a cause for industry celebration, not consternation.

But bankers are worried that new bulk-rate rules may jeopardize their savings.

The U.S. Postal Service has proposed lower rates for high-volume business mailers. Rates for ZIP-code-sorted bulk mail, for example - one of the many ways banks sort their mail - would drop by 2 cents, to 23.8 cents per letter, according to recommendations released last week by the Postal Rate Commission.

But the Postal Service wants to require bulk mailers to check their mailing lists twice a year against its official address data base to qualify for the lower rates.

This proposal, called the "move update" rule, seems harmless enough, but most states - including New York, New Jersey, and Delaware - limit institutions from updating their mailing lists until a customer provides a new address.

It's a Catch-22 situation, and bankers are unhappy.

The American Bankers Association and other business groups have been lobbying Postal Service managers for months, trying to change their minds before the rules are adopted later this year along with the rate cuts.

"There's serious concern about whether or not most banks are going to qualify for lower rates," said Irving Warden, an ABA lawyer and point man in lobbying the Postal Service. "You can have a great rate, but if you can't qualify for the rate, it can't do any good."

The ABA wants the Postal Service to exempt banks from the move update rule in cases where it could force banks to lose their bulk-rate discounts.

State statutes require banks to send monthly credit card statements to the address that is "on the books" at the bank until the customer changes the address. The same rules often apply when banks mail dividend checks and corporate proxy statements. For reasons of confidentiality and tradition, many banks adhere to the same standard when mailing checking account statements as well, Mr. Warden said.

Postal Service managers defend the move update rule as a way for both bulk mailers and the Postal Service to save money. The Postal Service processes more than 40 million address-change orders every year, and annually spends about $1.5 billion to forward mail.

"Move update is a very effective way to reduce postage costs by developing a more efficient mail stream," said Hank Cleffi, manager of mailing standards at the Postal Service.

The rule encourages businesses to "develop a system that would quickly identify address changes and redirect the mail as quickly as possible," he said.

Despite their problems with the move update rule, bankers are pleased with the discounts themselves.

"I think that most of the midsize and large banks would expect to see some significant reduction in postage costs," said Charles Fattore, vice president and head of distribution services for First National Bank of Chicago, the main banking subsidiary of First Chicago NBD Corp.

"Large banks especially will reap the benefits of the lower rates."

The new rates also should benefit consumer-oriented banks that make large bulk mailings, Mr. Fattore said. First Chicago NBD expects to save about 10% of its annual mailing budget, which Mr. Fattore would not divulge.

But it is unclear how much money the industry as a whole will save with the new rates. The Postal Service has introduced new discount-mailing categories to its myriad rate structure, making it tough to compare current and future mailing costs.

"Because of all the new rates and new classifications, we have nothing to justify (savings) projections," Mr. Warden said. "For individual banks I've talked to, estimates are all over the map. We would love to have statistics, but unfortunately we don't have reliable data from which to get them."

The new, lower rates are expected to take effect this summer, but the Postal Service Board of Governors must still approve the rate changes. The Board of Governors can either accept the changes, reject them, or send them back to the Postal Rate Commission for more tinkering.

The move update rule would go into effect about six months after the rate change.

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